A surge in the number of borrowers looking to refinance their mortgages in May, after the Reserve Bank cut the cash rate to 2%, saw a major aggregator have another record-breaking month.
AFG processed a total of $5,017 million during May – an increase of 18.9% on May 2014, and of 14.5% on April 2015. This is the second month this year that AFG has broken through the $5 billion barrier – the first being in March.
AFG’s Mortgage Index also reveals that the proportion of loans processed for investors is softening. Investment loans moderated from 43.1% of all borrowers in April to 40.9% in May, in an early indication the APRA driven lender policy and pricing changes may be starting to have an effect.
Meanwhile, the proportion of existing borrowers arranging new home loans comprised 38.2% of all loans, compared to 33.9% in April. The average proportion of refinancers for the 12 months leading up to May was 35%.
Fixed home loans spiked from 13.6% in April to 15.2% of all loans processed in May as more borrowers chose to fix the rate on all or part of their loans.
“Interest-rate cuts, like the one we had in [May], not only encourage new borrowers – but also prompt existing borrowers to review their arrangements. After the [May] rate cut, it appears many borrowers came to the view that we are at, or very close to, the bottom of the interest rate cycle,” Brett McKeon
, managing director of AFG said.
The attractive owner occupier offers available from lenders, along with the changes that are occurring in the investment market, make it a very busy time for brokers.
Non-major lenders fought back to recover some of the ground they lost to major lenders during the first four months of the year, increasing their combined share from 25.3% in April to 28.1% in May.